pre-budget brief
To: From: RE: House of Commons Standing Committee on Finance Scott Courtice, Executive Director, Ontario Undergraduate Student Alliance SUBMISSION TO HOUSE FINANCE COMMITTEE PRE-BUDGET CONSULTATIONS
EXECUTIVE SUMMARY PART I: A BRIGHT FUTURE DEPENDS ON HIGHER EDUCATION 1. Higher Education is Key to our Future Economic Growth
More than infrastructural investments, business subsidies, or tax cuts, a highly educated population is the primary vehicle for driving economic growth and prosperity. By creating better employment opportunities for graduates, post-secondary education has a broader economic effect of raising graduates’ wages, lowering unemployment rates, and increasing the tax base. Statistics Canada’s Survey of Labour and Income Dynamics examined 15,000 families in 2002, and found that university graduates make up slightly more than 15 per cent of the total population, but paid almost 35 per cent of total income taxes, and received only 8 per cent of government transfers.
2. Provinces Require Additional Fiscal Capacity to Invest in Higher Education
Ontario and Massachusetts were peers in their levels of prosperity in 1977. However, the two jurisdictions diverged in their growth strategies in intervening years, with Massachusetts out-investing Ontario in post-secondary education at a rate of three times per capita. In 2004, Massachusetts’ GDP per capita had moved ahead of Ontario’s by $19,100 (or 46 per cent). By strategically investing in post-secondary education, the state has become, as the Task Force describes, “the richest jurisdiction of meaningful size on the planet.” In order to shift the province’s current economic path and invest in future generations, the Task Force recommends first and foremost that investments in post-secondary education be raised; they argue this is essential to increase Ontario’s productivity and prosperity. The province requires additional fiscal capacity from the federal government to make these investments possible.
3. Canada is at risk of lagging behind
Another threat on the economic horizon is the growing pack of countries that are making higher education a national priority. Numerous former ‘developing’ nations are poised to leap-frog their western counterparts by building top-quality post-secondary systems and enrolling massive numbers of students. Whereas in 1990 China had a little over twice the number of university students as in Canada, by 2010 the country projects its enrolment to be almost the size of Canada’s entire population.
PART II: RECOMMENDED PRIORITIES FOR HIGHER EDUCATION IN THE 2007 FEDERAL BUDGET 1. Create a Dedicated Canada Education and Training Transfer to the Provinces
While the governance of post-secondary education is a provincial responsibility, federal funding and financial aid is an important and necessary part of the system. In recent years, a major cause of the under-funding of post-secondary education has been the decline of federal contributions.
Total annual cost of investment, which would increase in subsequent years according to inflation and demographic growth: $4 billion 2. Introduce a sustainable program to replace the Canadian Millennium Scholarship Foundation
The Canadian Millennium Scholarship Foundation was created in 1998 by an act of Parliament, and was provided with a onetime investment of $2.5 billion; the investment was endowed in a sinking fund, which is set to be exhausted by 2009-10.
Total cost of one-time investment to endow a new Foundation for 10 years: $3.5 billion Cost to extend CMSF mandate by one year to 2010-11: $350 million
__________________________________________________________________________________ The Ontario Undergraduate Student Alliance (OUSA) is a coalition of elected university student councils from across Ontario, representing over 125,000 undergraduate and professional students at seven universities across the province. www.ousa.ca
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PART I: A BRIGHT FUTURE DEPENDS ON HIGHER EDUCATION
Higher education holds a unique status among government responsibilities. Unlike other sectors or industries, it is difficult for universities to produce the immediate returns and measurable results that often drive our political system. However, higher education is a very strategic public investment, as it pays both economic and social dividends for decades to come.
1. Higher Education is Key to our Future Economic Growth
“Ontario workers are well-trained. That simple explanation was cited as a main reason why Toyota turned its back on hundreds of millions of dollars in subsidies offered from several American states in favour of building a second Ontario plant.” - Canadian Press Story on June 30, 2005, about the new Toyota plant in Woodstock.i More than infrastructural investments, business subsidies, or tax cuts, a highly educated population is the primary vehicle for driving economic growth and prosperity. By creating better employment opportunities for graduates, post-secondary education has a broader economic effect of raising graduates’ wages, lowering unemployment rates, and increasing the tax base. Statistics Canada’s Survey of Labour and Income Dynamics examined 15,000 families in 2002, and found that university graduates make up slightly more than 15 per cent of the total population, but paid almost 35 per cent of total income taxes, and received only 8 per cent of government transfers.ii Clearly, post-secondary graduates drive the Canadian economy. There are numerous other economic and social benefits from post-secondary education, as listed in Figure 1. Figure 1: The Economic and Social Benefits of Post-Secondary Educationiii Public Benefits of Higher Education Economic Increased tax revenues Greater productivity Increased consumption Increased workforce flexibility Decreased dependence on government financial support Social Reduced crime rates Increased civic engagement Stronger social cohesion and appreciation for diversity Improved ability to adapt to new technologies Less reliance on health care system
2. Provinces Require Additional Fiscal Capacity to Invest in Higher Education
Despite the significant funding allocated to post-secondary education by the Ontario government in their 2005 budget, these financial contributions only begin to repair a system long in crisis. Through the 1990s, higher education faced major funding cuts alongside growing enrolment, stretching the system to the brink. This crisis was created in part by a significant federal retrenchment in funding provided to provinces to deliver core social services, such as post-secondary education. The Ontario government’s Task Force on Competitiveness, Productivity and Economic Progress argues that in the long term, this neglect in higher education funding has led to Ontario lagging behind its former peers in vital economic measures such as per capita GDP. The Task Force was created by the provincial government in 2001 with a mandate to monitor Ontario’s competitiveness, and is chaired by the dean of the Rotman School of Business, Roger Martin. The task force notes that Ontario and Massachusetts were peers in their levels of prosperity in 1977. However, the two jurisdictions diverged in their growth strategies in intervening years, with Massachusetts out-investing Ontario in post-secondary education at a rate of three times per capita. In 2004, Massachusetts’ GDP per capita had moved ahead of Ontario’s by $19,100
__________________________________________________________________________________ The Ontario Undergraduate Student Alliance (OUSA) is a coalition of elected university student councils from across Ontario, representing over 125,000 undergraduate and professional students at seven universities across the province. www.ousa.ca
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(or 46 per cent). By strategically investing in post-secondary education, the state has become, as the Task Force describes, “the richest jurisdiction of meaningful size on the planet.” In order to shift the province’s current economic path and invest in future generations, the Task Force recommends first and foremost that investments in post-secondary education be raised; they argue this is essential to increase Ontario’s productivity and prosperity.iv The province requires additional fiscal capacity from the federal government to make these investments possible.
3. Canada is at risk of lagging behind
Another threat on the economic horizon is the growing pack of countries that are making higher education a national priority. Numerous former ‘developing’ nations are poised to leap-frog their western counterparts by building top-quality post-secondary systems and enrolling massive numbers of students. The primary challenger is China, which now has the largest and fastest-growing university population in the world. According to government sources, 11 million students enrolled in post-secondary institutions in 2000, and this grew to over 16 million in 2002.v By 2010, the country expects that they will have 27 million students enrolled in post-secondary education. While the country already is home to numerous top universities, China is also working to build 100 world-class institutions in the 21st century in an initiative called ‘Project 211’.vi This intensive focus on higher education could vault China into the position of a global higher education leader, and indeed, most likely an economic and political leader as well. The growth of China’s graduate population is dramatic, even after acknowledging the country’s huge population, as demonstrated in Figure 3 below. Whereas in 1990 China had a little over twice the number of university students as in Canada, by 2010 the country projects its enrolment to be almost the size of Canada’s entire population. Figure 3: Projected Enrolment in Higher Education Institutions for Selected Countries, 1990 to 2010vii
PROJECTED ENROLMENT IN HIGHER EDUCATION INSTITUTIONS FOR SELECTED COUNTRIES, 1990 to 2010
30 27
STUDENT POP. (in millions)
25 20 15 10 5 0.85 0 2.1
1990
17.9 13.8 15.7 11
1.25
2000
1.625
2010
C ANADA UNITED S TATES C HINA
YEAR
Countries without the vast populations of China or India are also poised to become higher education leaders through strategic investments in their post-secondary systems. In Singapore, the government recognized the country’s lack of natural resources and the threat of lower-cost workforces in nearby countries, and decided to pursue higher education as its primary vehicle for economic growth.viii In a project dubbed ‘Global Schoolhouse’, the Singaporean government has been devoting extensive public funding to transform the country into an international education hub for students from across Asia, Australia and beyond. Numerous internationally renowned universities have been drawn to open campuses in the city, including MIT, Johns Hopkins University, Stanford University, the University of Pennsylvania’s Wharton School of Business, France’s INSEAD business school, and Shanghai Jiao Tong University.ix The Singaporean government forecasts that their Global Schoolhouse strategy will result in a tripling of international students to 150,000 people by 2012, and allow Singapore to capture a greater share of the international education market, which they estimate at a value of $2.2-trillion.x
__________________________________________________________________________________ The Ontario Undergraduate Student Alliance (OUSA) is a coalition of elected university student councils from across Ontario, representing over 125,000 undergraduate and professional students at seven universities across the province. www.ousa.ca
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Both of these nations recognize the strategic importance of building strong higher education systems and educating their populace as routes to future growth. As Canada seeks to compete in this global marketplace, we must keep our eye on these and other challenges looming on the horizon.
PART II: RECOMMENDED PRIORITIES FOR HIGHER EDUCATION IN THE 2007 FEDERAL BUDGET
Given the threats and opportunities presented above, OUSA recommends the following priorities for the 2007 Federal Budget.
1. Create a Dedicated Canada Education and Training Transfer to the Provinces
While the governance of post-secondary education is a provincial responsibility, federal funding and financial aid is an important and necessary part of the system. In recent years, a major cause of the under-funding of post-secondary education has been the decline of federal contributions. In 1993, the federal government began to cut post-secondary transfer payments, and in 1996, post-secondary funding began to be lumped in the Canada Health and Social Transfer, where there was no requirement that funds be dedicated to education. As a consequence, these funds tended to be allocated towards healthcare and K-12 education.xi When adjusted for inflation and population growth, federal transfers to the provinces to fund post-secondary education in 2004 were 40 per cent lower than 1992/93.xii In recent years, federal funding of higher education has moved away from general operating funding, and has instead been directed toward research. In its September 2005 pre-budget submission to the House Finance Committee, the Canadian Alliance of Student Associations (CASA) advocates for a dedicated transfer with the following characteristics: 1. All money in the dedicated education transfer must be applied to post-secondary education; 2. An initial funding level of $4 billion in annual cash transfers would increase annually according to annual inflation and demographic growth. Of this sum, approximately $1 billion would go to Ontario’s post-secondary institutions, based on its population; 3. The education transfer agreement with the provinces would include a stipulation that they would not decrease their own post-secondary education spending when additional federal funding is provided.xiii OUSA strongly supports CASA’s proposal for a dedicated post-secondary transfer from the federal government, and believes that such a program must be announced in the next federal budget. OUSA recommends that the transfer be disbursed on a per capita basis, not through the equalization scheme.
Total annual cost of investment, which would increase in subsequent years according to inflation and demographic growth: $4 billion 2. Introduce a sustainable program to replace the Canadian Millennium Scholarship Foundation
The Canadian Millennium Scholarship Foundation was created in 1998 by an act of Parliament, and was provided with a onetime investment of $2.5 billion; the investment was endowed in a sinking fund, which is set to be exhausted by 2009-10. The financial support provided by the Canadian Millennium Scholarship Foundation (CMSF) represents 39 per cent of needbased financial aid expenditures in Ontario, and 27 per cent Canada-wide; for many provinces, including Manitoba, Newfoundland, Nova Scotia, and PEI, CMSF funds account for more than 40 per cent of need-based aid. With the mandate of the Foundation set to expire at the end of 2009, and with no plan from the federal government to replace the funds in sight, we are deeply concerned that a crisis is looming for student financial assistance in Canada.
__________________________________________________________________________________ The Ontario Undergraduate Student Alliance (OUSA) is a coalition of elected university student councils from across Ontario, representing over 125,000 undergraduate and professional students at seven universities across the province. www.ousa.ca
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The expiry of the Foundation is only two years away. Thus, a plan to replace funds provided by the Foundation must be announced in the next federal budget to eliminate uncertainty, and allow provincial governments to factor the federal decision into their budget cycles. This plan could involve the creation of a new foundation, the introduction of a federally administered grants program, or a cash transfer to the provinces specifically earmarked for need-based grants. The longer the federal government waits to make a decision, the deeper the crisis will become. Any new program must ensure that the level of need-based grants is maintained or enhanced and that the flow of grants is not interrupted during the transition from CMSF funding to a new program or foundation. To ensure a smooth transition to any post-CMSF option, a decision must be made now: • A new grants program administered by the federal government will require provincial negotiations, and the federal bureaucracy will require time to design and implement the program; • A transfer to the provinces will require provincial negotiations, and provincial ministries will require time to implement a provincially administered grants programs; and, • The endowment of a new foundation should include an extensive review of CMSF operations to ensure lessons learned are built into the new foundation’s operations. While an immediate and sustainable solution is preferred by OUSA, the federal government could choose to extend the life of the current Foundation until a new program or foundation can be planned and implemented.
Total cost of one-time investment to endow a new Foundation for 10 years: $3.5 billionxiv Cost to extend CMSF mandate by one year to 2010-11: $350 million
HOW TO CONTACT OUSA: Scott Courtice, Executive Director 345-26 Soho Street Toronto, Ontario, M5T 1Z7 CITATIONS
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416-341-9948 scott@ousa.on.ca
Steve Erwin “Toyota to build 100,000 vehicles per year in Woodstock, Ont., starting 2008”, Canadian Press, accessed online at http://www.cbc.ca/cp/business/050630/b0630102.html ii Sean Junor and Alex Usher, The Price of Knowledge 2004: Access and Student Finances in Canada (Montreal: Canadian Millennium Scholarship Foundation, 2004), p.321-322 iii Adapted from Institute for Higher Education Policy, cited by Junor and Usher 2004, p.321 iv Task Force on Competitiveness, Productivity and Economic Progress, Rebalancing Priorities for Prosperity: Fourth Annual Report, November 2005 (Toronto: Institute for Competitiveness and Prosperity, 2005) p. 14, 18, 21, 40; accessed online at http://competeprosper.ca/task/ar2005.pdf v Li Heng, “China’s higher education accessible to the masses: minister”, People’s Daily, October 20, 2003; accessed online at http://english.people.com.cn/200310/20/eng20031020_126428.shtml vi China Education and Research Network, “Project 211: A brief introduction”; accessed online at http://www.edu.cn/20010101/21851.shtml. vii U.S. Enrolment: (1990): http://nces.ed.gov/pubs/96851.pdf (page 2); (2000): Governance, Reference 180. (2010): http://nces.ed.gov/programs/digest/d02/ch_3.asp#1 (projected enrolment based on an increase of 14 per cent from 2000 according to source); Canadian Enrolment: (1990): http://ia.usask.ca/statistics/pdf-1997/sect1-1997.pdf [full-time students - college, undergrad/grad] (2010) Based on AUCC projection of 30 per cent increase between 2001 and 2011, broadly applied to both universities and colleges; Chinese Enrolment: (1990): Hayhoe and Zha (2004), 21. (2000): Governance; (2010): Governance viii Reuters, “Singapore hopes to become global education hub”, October 13, 2003; accessed online at http://www.cnn.com/2003/EDUCATION/10/13/singapore.education.reut/. ix Singapore government website; accessed online at http://www.edb.gov.sg/edb/sg/en_uk/index/industry_sectors/education_services.html. x Reuters, 2003. xi Canadian Alliance of Student Associations, Think Education: Bigger Picture, Brighter Future (Ottawa: CASA, 2004), p.5. xii Canadian Association of University Teachers, “Financing Canada’s Universities and Colleges”, CAUT Education Review 7(2), August 2005, p.4; accessed online at http://www.caut.ca/en/publications/educationreview/education-review-7-2.pdf. xiii Canadian Alliance of Student Associations, Think Education: It Makes Sense (Ottawa: CASA, 2005); accessed online at http://www.casa.ca/documents/prebudgreport_english_2005.pdf. xiv This assumes a minimum $350 million annual disbursement over a 10-year period (this would maintain current level of grants provided by the Foundation); the annual disbursement could exceed $350 million if the endowment fund performs well. __________________________________________________________________________________ The Ontario Undergraduate Student Alliance (OUSA) is a coalition of elected university student councils from across Ontario, representing over 125,000 undergraduate and professional students at seven universities across the province. www.ousa.ca
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